CNA Financial Corporation
Supplemental Financial Information
December 31, 2015
This report is for informational purposes only and includes consolidated financial statements and financial exhibits that are unaudited. This report should be read in conjunction with documents filed with the U.S. Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
Table of Contents
| Page | |
| Consolidated Results | |
Statements of Operations.................................................................................................................................................................................................. | |
Components of Income (Loss), Per Share Data and Return on Equity............................................................................................................................. | |
Selected Balance Sheet Data and Statement of Cash Flows Data............................................................................................................................... | |
| Property & Casualty - Results of Operations | |
Property & Casualty........................................................................................................................................................................................................... | |
Specialty.................................................................................................................................................................................................................... | |
Commercial............................................................................................................................................................................................................... | |
| International....................................................................................................................................................................................................................... | |
| Non-Core - Results of Operations | |
Life & Group Non-Core...................................................................................................................................................................................................... | |
Corporate & Other Non-Core............................................................................................................................................................................................. | |
| Investment Information | |
Investment Summary - Consolidated................................................................................................................................................................................ | |
Investment Summary - Property & Casualty and Corporate & Other Non-Core............................................................................................................... | |
Investment Summary - Life & Group Non-Core................................................................................................................................................................. | |
Investments - Fixed Maturity Securities by Credit Rating.................................................................................................................................................. | |
Components of Net Investment Income................................................................................................................................................................. | |
| Other | |
Claim & Claim Adjustment Expense Reserve Rollforward................................................................................................................................................ | |
Life & Group Non-Core Policyholder Reserves................................................................................................................................................................. | |
Definitions and Presentation.............................................................................................................................................................................................. | |
Statements of Operations
| Periods ended December 31 | Three Months | Twelve Months | |||||||||||||||||||||
| (In millions) | 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Net earned premiums | $ | 1,748 | $ | 1,785 | (2 | ) | % | $ | 6,921 | $ | 7,212 | (4 | ) | % | |||||||||
| Net investment income | 428 | 511 | (16 | ) | 1,840 | 2,067 | (11 | ) | |||||||||||||||
| Net realized investment gains (losses): | |||||||||||||||||||||||
| Other-than-temporary impairment (OTTI) losses | (57 | ) | (60 | ) | (156 | ) | (77 | ) | |||||||||||||||
| Portion of OTTI recognized in Other comprehensive income (loss) | — | — | — | — | |||||||||||||||||||
| Net OTTI losses recognized in earnings | (57 | ) | (60 | ) | (156 | ) | (77 | ) | |||||||||||||||
| Other net realized investment gains (losses) | 29 | 48 | 89 | 134 | |||||||||||||||||||
| Net realized investment gains (losses) | (28 | ) | (12 | ) | (67 | ) | 57 | ||||||||||||||||
| Other revenues | 121 | 94 | 407 | 356 | |||||||||||||||||||
| Total revenues | 2,269 | 2,378 | (5 | ) | 9,101 | 9,692 | (6 | ) | |||||||||||||||
| Claims, Benefits and Expenses: | |||||||||||||||||||||||
| Insurance claims and policyholders' benefits | 1,376 | 1,350 | 5,384 | 5,591 | |||||||||||||||||||
| Amortization of deferred acquisition costs | 604 | 321 | 1,540 | 1,317 | |||||||||||||||||||
| Other operating expenses | 412 | 410 | 1,473 | 1,394 | |||||||||||||||||||
| Interest | 38 | 45 | 155 | 183 | |||||||||||||||||||
| Total claims, benefits and expenses | 2,430 | 2,126 | (14 | ) | 8,552 | 8,485 | (1 | ) | |||||||||||||||
| Income (loss) before income tax | (161 | ) | 252 | 549 | 1,207 | ||||||||||||||||||
| Income tax (expense) benefit | 91 | (54 | ) | (70 | ) | (319 | ) | ||||||||||||||||
| Income (loss) from continuing operations | (70 | ) | 198 | (135 | ) | 479 | 888 | (46 | ) | ||||||||||||||
| Income (loss) from discontinued operations, net of tax | — | — | — | (197 | ) | ||||||||||||||||||
| Net income (loss) | $ | (70 | ) | $ | 198 | (135 | ) | % | $ | 479 | $ | 691 | (31 | ) | % | ||||||||
1
Components of Income (Loss), Per Share Data and Return on Equity
| Periods ended December 31 | Three Months | Twelve Months | |||||||||||||||
| (In millions, except per share data) | 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Components of Income (Loss) | |||||||||||||||||
| Net operating income (loss) | $ | (52 | ) | $ | 205 | $ | 515 | $ | 849 | ||||||||
| Net realized investment gains (losses) | (18 | ) | (7 | ) | (36 | ) | 39 | ||||||||||
| Income (loss) from continuing operations | (70 | ) | 198 | 479 | 888 | ||||||||||||
| Income (loss) from discontinued operations | — | — | — | (197 | ) | ||||||||||||
| Net income (loss) | $ | (70 | ) | $ | 198 | $ | 479 | $ | 691 | ||||||||
| Diluted Earnings (Loss) Per Common Share | |||||||||||||||||
| Net operating income (loss) | $ | (0.19 | ) | $ | 0.76 | $ | 1.90 | $ | 3.14 | ||||||||
| Net realized investment gains (losses) | (0.07 | ) | (0.03 | ) | (0.13 | ) | 0.14 | ||||||||||
| Income (loss) from continuing operations | (0.26 | ) | 0.73 | 1.77 | 3.28 | ||||||||||||
| Income (loss) from discontinued operations | — | — | — | (0.73 | ) | ||||||||||||
| Diluted earnings (loss) per share | $ | (0.26 | ) | $ | 0.73 | $ | 1.77 | $ | 2.55 | ||||||||
| Weighted Average Outstanding Common Stock and Common Stock Equivalents | |||||||||||||||||
| Basic | 270.3 | 270.0 | 270.2 | 269.9 | |||||||||||||
| Diluted | 270.8 | 270.7 | 270.7 | 270.6 | |||||||||||||
| Return on Equity | |||||||||||||||||
Net income (loss) (1) | (2.3 | ) | % | 6.1 | % | 3.9 | % | 5.4 | % | ||||||||
Net operating income (loss) (2) | (1.7 | ) | 6.7 | 4.2 | 6.9 | ||||||||||||
(1) Annualized net income (loss) divided by the average stockholders' equity including accumulated other comprehensive income (loss) (AOCI) for the period. Average equity including AOCI is calculated using a simple average of the beginning and ending balances for the period.
(2) Annualized net operating income (loss) divided by the average stockholders' equity excluding AOCI for the period. Average equity excluding AOCI is calculated using a simple average of the beginning and ending balances for the period.
2
Selected Balance Sheet Data and Statement of Cash Flows Data(1)
| (In millions, except per share data) | December 31, 2015 | December 31, 2014 | |||||
| Total investments | $ | 44,699 | $ | 46,262 | |||
| Reinsurance receivables, net of allowance for uncollectible receivables | 4,453 | 4,694 | |||||
| Total assets | 55,047 | 55,566 | |||||
| Insurance reserves | 36,486 | 36,380 | |||||
| Debt | 2,562 | 2,559 | |||||
| Total liabilities | 43,291 | 42,772 | |||||
Accumulated other comprehensive income (loss) (2) | (315 | ) | 400 | ||||
| Total stockholders' equity | 11,756 | 12,794 | |||||
| Book value per common share | $ | 43.49 | $ | 47.39 | |||
| Book value per common share excluding AOCI | $ | 44.66 | $ | 45.91 | |||
| Outstanding shares of common stock (in millions of shares) | 270.3 | 270.0 | |||||
Statutory capital and surplus - Combined Continental Casualty Companies (3) | $ | 10,723 | $ | 11,155 | |||
| Three months ended December 31 | 2015 | 2014 | |||||
| Net cash flows provided (used) by operating activities | $ | 342 | $ | 393 | |||
| Net cash flows provided (used) by investing activities | (118 | ) | 169 | ||||
| Net cash flows provided (used) by financing activities | (68 | ) | (614 | ) | |||
| Net cash flows provided (used) by operating, investing and financing activities | $ | 156 | $ | (52 | ) | ||
| Twelve months ended December 31 | 2015 | 2014 | |||||
| Net cash flows provided (used) by operating activities | $ | 1,387 | $ | 1,440 | |||
| Net cash flows provided (used) by investing activities | (372 | ) | (918 | ) | |||
| Net cash flows provided (used) by financing activities | (807 | ) | (519 | ) | |||
| Net cash flows provided (used) by operating, investing and financing activities | $ | 208 | $ | 3 | |||
(1) On August 1, 2014, CNA completed the sale of the common stock of Continental Assurance Company (CAC), CNA's former life insurance subsidiary. CNA elected to include CAC cash flow data in the comparative period.
(2) As of December 31, 2015 and 2014, the net unrealized gains on investments included in AOCI were net of after-tax Shadow Adjustments of $1,111 million and $1,288 million. To the extent that unrealized gains on fixed income securities supporting certain products within the Life & Group Non-Core segment would result in a premium deficiency if realized, a related decrease in Deferred acquisition costs and/or increase in Insurance reserves are recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments).
(3) Statutory capital and surplus as of December 31, 2015 is preliminary.
3
Property & Casualty - Results of Operations
| Periods ended December 31 | Three Months | Twelve Months | |||||||||||||||||||||
| (In millions) | 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||||||
| Gross written premiums | $ | 2,547 | $ | 2,334 | 9 | % | $ | 10,124 | $ | 9,558 | 6 | % | |||||||||||
| Net written premiums | 1,585 | 1,555 | 2 | 6,421 | 6,536 | (2 | ) | ||||||||||||||||
| Net earned premiums | 1,612 | 1,646 | (2 | ) | 6,374 | 6,657 | (4 | ) | |||||||||||||||
| Net investment income | 259 | 326 | 1,119 | 1,344 | |||||||||||||||||||
| Other revenues | 120 | 87 | 392 | 333 | |||||||||||||||||||
| Total operating revenues | 1,991 | 2,059 | (3 | ) | 7,885 | 8,334 | (5 | ) | |||||||||||||||
| Insurance claims and policyholders' benefits | 1,017 | 984 | 3,902 | 4,316 | |||||||||||||||||||
| Amortization of deferred acquisition costs | 309 | 315 | 1,226 | 1,289 | |||||||||||||||||||
| Other insurance related expenses | 266 | 214 | 954 | 900 | |||||||||||||||||||
| Other expenses | 100 | 77 | 341 | 313 | |||||||||||||||||||
| Total claims, benefits and expenses | 1,692 | 1,590 | (6 | ) | 6,423 | 6,818 | 6 | ||||||||||||||||
| Operating income (loss) before income tax | 299 | 469 | 1,462 | 1,516 | |||||||||||||||||||
| Income tax (expense) benefit on operating income (loss) | (97 | ) | (155 | ) | (496 | ) | (506 | ) | |||||||||||||||
| Net operating income (loss) | $ | 202 | $ | 314 | (36 | ) | % | $ | 966 | $ | 1,010 | (4 | ) | % | |||||||||
| Other Performance Metrics | |||||||||||||||||||||||
| Underwriting gain (loss) | $ | 20 | $ | 133 | (85 | ) | % | $ | 292 | $ | 152 | 92 | % | ||||||||||
| Loss & LAE ratio | 62.9 | % | 59.6 | % | (3.3 | ) | pts | 61.0 | % | 64.6 | % | 3.6 | pts | ||||||||||
| Acquisition expense ratio | 20.3 | 17.6 | (2.7 | ) | 19.4 | 19.0 | (0.4 | ) | |||||||||||||||
| Underwriting expense ratio | 15.5 | 14.4 | (1.1 | ) | 14.8 | 13.9 | (0.9 | ) | |||||||||||||||
| Expense ratio | 35.8 | 32.0 | (3.8 | ) | 34.2 | 32.9 | (1.3 | ) | |||||||||||||||
| Dividend ratio | 0.2 | 0.2 | — | 0.2 | 0.2 | — | |||||||||||||||||
| Combined ratio | 98.9 | % | 91.8 | % | (7.1 | ) | 95.4 | % | 97.7 | % | 2.3 | ||||||||||||
| Combined ratio excluding catastrophes and development | 97.7 | % | 93.6 | % | (4.1 | ) | pts | 96.3 | % | 95.9 | % | (0.4 | ) | pts | |||||||||
| Net accident year catastrophe losses incurred | $ | 38 | $ | 9 | $ | 141 | $ | 156 | |||||||||||||||
| Effect on loss & LAE ratio | 2.4 | % | 0.6 | % | (1.8 | ) | pts | 2.2 | % | 2.3 | % | 0.1 | pts | ||||||||||
| Net prior year development and other: (favorable) / unfavorable | $ | (17 | ) | $ | (39 | ) | $ | (199 | ) | $ | (43 | ) | |||||||||||
| Effect on loss & LAE ratio | (1.2 | ) | % | (2.4 | ) | % | (1.2 | ) | pts | (3.1 | ) | % | (0.5 | ) | % | 2.6 | pts | ||||||
| Rate | — | % | 3 | % | (3 | ) | pts | 1 | % | 3 | % | (2 | ) | pts | |||||||||
| Retention | 84 | % | 79 | % | 5 | pts | 81 | % | 78 | % | 3 | pts | |||||||||||
| New Business | $ | 231 | $ | 192 | 20 | % | $ | 942 | $ | 915 | 3 | % | |||||||||||
4
Specialty - Results of Operations
| Periods ended December 31 | Three Months | Twelve Months | |||||||||||||||||||||
| (In millions) | 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||||||
| Gross written premiums | $ | 1,623 | $ | 1,415 | 15 | % | $ | 6,242 | $ | 5,608 | 11 | % | |||||||||||
| Net written premiums | 704 | 689 | 2 | 2,781 | 2,839 | (2 | ) | ||||||||||||||||
| Net earned premiums | 707 | 712 | (1 | ) | 2,782 | 2,838 | (2 | ) | |||||||||||||||
| Net investment income | 109 | 137 | 474 | 560 | |||||||||||||||||||
| Other revenues | 111 | 77 | 356 | 295 | |||||||||||||||||||
| Total operating revenues | 927 | 926 | — | 3,612 | 3,693 | (2 | ) | ||||||||||||||||
| Insurance claims and policyholders' benefits | 446 | 416 | 1,601 | 1,633 | |||||||||||||||||||
| Amortization of deferred acquisition costs | 149 | 150 | 589 | 592 | |||||||||||||||||||
| Other insurance related expenses | 76 | 65 | 278 | 262 | |||||||||||||||||||
| Other expenses | 92 | 63 | 301 | 254 | |||||||||||||||||||
| Total claims, benefits and expenses | 763 | 694 | (10 | ) | 2,769 | 2,741 | (1 | ) | |||||||||||||||
| Operating income (loss) before income tax | 164 | 232 | 843 | 952 | |||||||||||||||||||
| Income tax (expense) benefit on operating income (loss) | (55 | ) | (78 | ) | (283 | ) | (318 | ) | |||||||||||||||
| Net operating income (loss) | $ | 109 | $ | 154 | (29 | ) | % | $ | 560 | $ | 634 | (12 | ) | % | |||||||||
| Other Performance Metrics | |||||||||||||||||||||||
| Underwriting gain (loss) | 36 | 81 | (56 | ) | % | 314 | 351 | (11 | ) | % | |||||||||||||
| Loss & LAE ratio | 63.1 | % | 58.1 | % | (5.0 | ) | pts | 57.4 | % | 57.3 | % | (0.1 | ) | pts | |||||||||
| Acquisition expense ratio | 20.1 | 19.5 | (0.6 | ) | 19.8 | 19.7 | (0.1 | ) | |||||||||||||||
| Underwriting expense ratio | 11.6 | 10.7 | (0.9 | ) | 11.3 | 10.4 | (0.9 | ) | |||||||||||||||
| Expense ratio | 31.7 | 30.2 | (1.5 | ) | 31.1 | 30.1 | (1.0 | ) | |||||||||||||||
| Dividend ratio | 0.2 | 0.1 | (0.1 | ) | 0.2 | 0.2 | — | ||||||||||||||||
| Combined ratio | 95.0 | % | 88.4 | % | (6.6 | ) | 88.7 | % | 87.6 | % | (1.1 | ) | |||||||||||
| Combined ratio excluding catastrophes and development | 95.4 | % | 90.4 | % | (5.0 | ) | pts | 93.6 | % | 92.0 | % | (1.6 | ) | pts | |||||||||
| Net accident year catastrophe losses incurred | $ | (2 | ) | $ | — | $ | 13 | $ | 21 | ||||||||||||||
| Effect on loss & LAE ratio | (0.3 | ) | % | — | % | 0.3 | pts | 0.4 | % | 0.7 | % | 0.3 | pts | ||||||||||
| Net prior year development and other: (favorable) / unfavorable | $ | (1 | ) | $ | (14 | ) | $ | (152 | ) | $ | (149 | ) | |||||||||||
| Effect on loss & LAE ratio | (0.1 | ) | % | (2.0 | ) | % | (1.9 | ) | pts | (5.3 | ) | % | (5.1 | ) | % | 0.2 | pts | ||||||
| Rate | — | % | 3 | % | (3 | ) | pts | 1 | % | 3 | % | (2 | ) | pts | |||||||||
| Retention | 87 | % | 86 | % | 1 | pts | 86 | % | 87 | % | (1 | ) | pts | ||||||||||
| New Business | $ | 73 | $ | 70 | 4 | % | $ | 279 | $ | 309 | (10 | ) | % | ||||||||||
5
Commercial - Results of Operations
| Periods ended December 31 | Three Months | Twelve Months | |||||||||||||||||||||
| (In millions) | 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||||||
| Gross written premiums | $ | 726 | $ | 714 | 2 | % | $ | 2,967 | $ | 2,959 | — | % | |||||||||||
| Net written premiums | 700 | 684 | 2 | 2,818 | 2,817 | — | |||||||||||||||||
| Net earned premiums | 702 | 718 | (2 | ) | 2,788 | 2,906 | (4 | ) | |||||||||||||||
| Net investment income | 138 | 174 | 593 | 723 | |||||||||||||||||||
| Other revenues | 10 | 10 | 37 | 38 | |||||||||||||||||||
| Total operating revenues | 850 | 902 | (6 | ) | 3,418 | 3,667 | (7 | ) | |||||||||||||||
| Insurance claims and policyholders' benefits | 428 | 462 | 1,822 | 2,195 | |||||||||||||||||||
| Amortization of deferred acquisition costs | 117 | 122 | 469 | 493 | |||||||||||||||||||
| Other insurance related expenses | 153 | 111 | 538 | 487 | |||||||||||||||||||
| Other expenses | 5 | 6 | 28 | 31 | |||||||||||||||||||
| Total claims, benefits and expenses | 703 | 701 | — | 2,857 | 3,206 | 11 | |||||||||||||||||
| Operating income (loss) before income tax | 147 | 201 | 561 | 461 | |||||||||||||||||||
| Income tax (expense) benefit on operating income (loss) | (51 | ) | (69 | ) | (192 | ) | (154 | ) | |||||||||||||||
| Net operating income (loss) | $ | 96 | $ | 132 | (27 | ) | % | $ | 369 | $ | 307 | 20 | % | ||||||||||
| Other Performance Metrics | |||||||||||||||||||||||
| Underwriting gain (loss) | $ | 4 | $ | 23 | (83 | ) | % | $ | (41 | ) | $ | (269 | ) | 85 | % | ||||||||
| Loss & LAE ratio | 60.6 | % | 64.2 | % | 3.6 | pts | 65.1 | % | 75.3 | % | 10.2 | pts | |||||||||||
| Acquisition expense ratio | 19.9 | 15.0 | (4.9 | ) | 18.2 | 17.0 | (1.2 | ) | |||||||||||||||
| Underwriting expense ratio | 18.7 | 17.3 | (1.4 | ) | 17.9 | 16.7 | (1.2 | ) | |||||||||||||||
| Expense ratio | 38.6 | 32.3 | (6.3 | ) | 36.1 | 33.7 | (2.4 | ) | |||||||||||||||
| Dividend ratio | 0.4 | 0.3 | (0.1 | ) | 0.3 | 0.3 | — | ||||||||||||||||
| Combined ratio | 99.6 | % | 96.8 | % | (2.8 | ) | 101.5 | % | 109.3 | % | 7.8 | ||||||||||||
| Combined ratio excluding catastrophes and development | 98.3 | % | 95.6 | % | (2.7 | ) | pts | 98.0 | % | 98.6 | % | 0.6 | pts | ||||||||||
| Net accident year catastrophe losses incurred | $ | 18 | $ | 4 | $ | 101 | $ | 125 | |||||||||||||||
| Effect on loss & LAE ratio | 2.7 | % | 0.6 | % | (2.1 | ) | pts | 3.6 | % | 4.4 | % | 0.8 | pts | ||||||||||
| Net prior year development and other: (favorable) / unfavorable | $ | (9 | ) | $ | 5 | $ | (10 | ) | $ | 177 | |||||||||||||
| Effect on loss & LAE ratio | (1.4 | ) | % | 0.6 | % | 2.0 | pts | (0.1 | ) | % | 6.3 | % | 6.4 | pts | |||||||||
| Rate | 1 | % | 4 | % | (3 | ) | pts | 2 | % | 5 | % | (3 | ) | pts | |||||||||
| Retention | 84 | % | 76 | % | 8 | pts | 79 | % | 73 | % | 6 | pts | |||||||||||
| New Business | $ | 130 | $ | 95 | 37 | % | $ | 552 | $ | 491 | 12 | % | |||||||||||
6
International - Results of Operations
| Periods ended December 31 | Three Months | Twelve Months | |||||||||||||||||||||
| (In millions) | 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||||||
| Gross written premiums | $ | 198 | $ | 205 | (3 | ) | % | $ | 915 | $ | 991 | (8 | ) | % | |||||||||
| Net written premiums | 181 | 182 | (1 | ) | 822 | 880 | (7 | ) | |||||||||||||||
| Net earned premiums | 203 | 216 | (6 | ) | 804 | 913 | (12 | ) | |||||||||||||||
| Net investment income | 12 | 15 | 52 | 61 | |||||||||||||||||||
| Other revenues | (1 | ) | — | (1 | ) | — | |||||||||||||||||
| Total operating revenues | 214 | 231 | (7 | ) | 855 | 974 | (12 | ) | |||||||||||||||
| Insurance claims and policyholders' benefits | 143 | 106 | 479 | 488 | |||||||||||||||||||
| Amortization of deferred acquisition costs | 43 | 43 | 168 | 204 | |||||||||||||||||||
| Other insurance related expenses | 37 | 38 | 138 | 151 | |||||||||||||||||||
| Other expenses | 3 | 8 | 12 | 28 | |||||||||||||||||||
| Total claims, benefits and expenses | 226 | 195 | (16 | ) | 797 | 871 | 8 | ||||||||||||||||
| Operating income (loss) before income tax | (12 | ) | 36 | 58 | 103 | ||||||||||||||||||
| Income tax (expense) benefit on operating income (loss) | 9 | (8 | ) | (21 | ) | (34 | ) | ||||||||||||||||
| Net operating income (loss) | $ | (3 | ) | $ | 28 | (111 | ) | % | $ | 37 | $ | 69 | (46 | ) | % | ||||||||
| Other Performance Metrics | |||||||||||||||||||||||
| Underwriting gain (loss) | $ | (20 | ) | $ | 29 | (169 | ) | % | $ | 19 | $ | 70 | (73 | ) | % | ||||||||
| Loss & LAE ratio | 70.3 | % | 49.2 | % | (21.1 | ) | pts | 59.5 | % | 53.5 | % | (6.0 | ) | pts | |||||||||
| Acquisition expense ratio | 22.1 | 19.8 | (2.3 | ) | 22.0 | 22.9 | 0.9 | ||||||||||||||||
| Underwriting expense ratio | 17.5 | 17.9 | 0.4 | 16.1 | 16.0 | (0.1 | ) | ||||||||||||||||
| Expense ratio | 39.6 | 37.7 | (1.9 | ) | 38.1 | 38.9 | 0.8 | ||||||||||||||||
| Dividend ratio | — | — | — | — | — | — | |||||||||||||||||
| Combined ratio | 109.9 | % | 86.9 | % | (23.0 | ) | 97.6 | % | 92.4 | % | (5.2 | ) | |||||||||||
| Combined ratio excluding catastrophes and development | 103.1 | % | 98.0 | % | (5.1 | ) | pts | 99.8 | % | 99.2 | % | (0.6 | ) | pts | |||||||||
| Net accident year catastrophe losses incurred | $ | 22 | $ | 5 | $ | 27 | $ | 10 | |||||||||||||||
| Effect on loss & LAE ratio | 10.7 | % | 2.2 | % | (8.5 | ) | pts | 3.3 | % | 1.0 | % | (2.3 | ) | pts | |||||||||
| Net prior year development and other: (favorable) / unfavorable | $ | (7 | ) | $ | (30 | ) | $ | (37 | ) | $ | (71 | ) | |||||||||||
| Effect on loss & LAE ratio | (3.9 | ) | % | (13.3 | ) | % | (9.4 | ) | pts | (5.5 | ) | % | (7.8 | ) | % | (2.3 | ) | pts | |||||
| Rate | (1 | ) | % | — | % | (1 | ) | pts | (1 | ) | % | (1 | ) | % | — | pts | |||||||
| Retention | 73 | % | 66 | % | 7 | pts | 76 | % | 74 | % | 2 | pts | |||||||||||
| New Business | 28 | 27 | — | % | 111 | 115 | (3 | ) | % | ||||||||||||||
7
Life & Group Non-Core - Results of Operations
| Periods ended December 31 | Three Months | Twelve Months | |||||||||||||||||||||
| (In millions) | 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||||||
| Net earned premiums | $ | 136 | $ | 139 | (2 | ) | % | $ | 548 | $ | 556 | (1 | ) | % | |||||||||
| Net investment income | 164 | 179 | 704 | 700 | |||||||||||||||||||
| Other revenues | (1 | ) | 6 | 7 | 16 | ||||||||||||||||||
| Total operating revenues | 299 | 324 | (8 | ) | 1,259 | 1,272 | (1 | ) | |||||||||||||||
| Insurance claims and policyholders' benefits | 376 | 375 | 1,421 | 1,304 | |||||||||||||||||||
| Amortization of deferred acquisition costs | 295 | 6 | 314 | 28 | |||||||||||||||||||
| Other insurance related expenses | 38 | 34 | 142 | 130 | |||||||||||||||||||
| Other expenses | 1 | (4 | ) | 11 | 30 | ||||||||||||||||||
| Total claims, benefits and expenses | 710 | 411 | (73 | ) | 1,888 | 1,492 | (27 | ) | |||||||||||||||
| Operating income (loss) before income tax | (411 | ) | (87 | ) | (629 | ) | (220 | ) | |||||||||||||||
| Income tax (expense) benefit on operating income (loss) | 168 | 53 | 315 | 151 | |||||||||||||||||||
| Net operating income (loss) | $ | (243 | ) | $ | (34 | ) | N/M | % | $ | (314 | ) | $ | (69 | ) | N/M | % | |||||||
8
Corporate & Other Non-Core - Results of Operations
| Periods ended December 31 | Three Months | Twelve Months | |||||||||||||||||||||
| (In millions) | 2015 | 2014 | Change | 2015 | 2014 | Change | |||||||||||||||||
| Net earned premiums | $ | — | $ | — | $ | (1 | ) | $ | (1 | ) | |||||||||||||
| Net investment income | 5 | 6 | 17 | 23 | |||||||||||||||||||
| Other revenues | 2 | 1 | 8 | 7 | |||||||||||||||||||
| Total operating revenues | 7 | 7 | — | % | 24 | 29 | (17 | ) | % | ||||||||||||||
| Insurance claims and policyholders' benefits | (17 | ) | (9 | ) | 61 | (29 | ) | ||||||||||||||||
| Amortization of deferred acquisition costs | — | — | — | — | |||||||||||||||||||
| Other insurance related expenses | (1 | ) | — | (3 | ) | (1 | ) | ||||||||||||||||
| Other expenses | 46 | 134 | 183 | 205 | |||||||||||||||||||
| Total claims, benefits and expenses | 28 | 125 | 78 | 241 | 175 | (38 | ) | ||||||||||||||||
| Operating income (loss) before income tax | (21 | ) | (118 | ) | (217 | ) | (146 | ) | |||||||||||||||
| Income tax (expense) benefit on operating income (loss) | 10 | 43 | 80 | 54 | |||||||||||||||||||
| Net operating income (loss) | $ | (11 | ) | $ | (75 | ) | 85 | % | $ | (137 | ) | $ | (92 | ) | (49 | ) | % | ||||||
9
Investment Summary - Consolidated
| December 31, 2015 | September 30, 2015 | December 31, 2014 | |||||||||||||||||||||
| (In millions) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | |||||||||||||||||
| Fixed maturity securities: | |||||||||||||||||||||||
| Corporate and other bonds | $ | 17,760 | $ | 677 | $ | 18,188 | $ | 1,030 | $ | 18,889 | $ | 1,660 | |||||||||||
| States, municipalities and political subdivisions: | |||||||||||||||||||||||
| Tax-exempt | 10,114 | 1,076 | 10,203 | 911 | 9,802 | 988 | |||||||||||||||||
| Taxable | 3,060 | 369 | 3,094 | 408 | 2,938 | 467 | |||||||||||||||||
| Total states, municipalities and political subdivisions | 13,174 | 1,445 | 13,297 | 1,319 | 12,740 | 1,455 | |||||||||||||||||
| Asset-backed: | |||||||||||||||||||||||
| RMBS | 5,072 | 137 | 5,041 | 191 | 5,233 | 205 | |||||||||||||||||
| CMBS | 2,197 | 43 | 2,251 | 68 | 2,144 | 88 | |||||||||||||||||
| Other ABS | 921 | (2 | ) | 1,016 | 7 | 1,235 | 1 | ||||||||||||||||
| Total asset-backed | 8,190 | 178 | 8,308 | 266 | 8,612 | 294 | |||||||||||||||||
| U.S. Treasury and obligations of government-sponsored enterprises | 67 | 5 | 29 | 5 | 31 | 5 | |||||||||||||||||
| Foreign government | 346 | 12 | 344 | 11 | 454 | 16 | |||||||||||||||||
| Redeemable preferred stock | 35 | 2 | 35 | 2 | 42 | 3 | |||||||||||||||||
| Total fixed maturity securities | 39,572 | 2,319 | 40,201 | 2,633 | 40,768 | 3,433 | |||||||||||||||||
| Equities | 197 | 6 | 212 | 5 | 222 | 12 | |||||||||||||||||
| Limited partnership investments | 2,548 | — | 2,738 | — | 2,937 | — | |||||||||||||||||
| Other invested assets | 44 | — | 45 | — | 41 | — | |||||||||||||||||
| Mortgage loans | 678 | — | 640 | — | 588 | — | |||||||||||||||||
| Short term investments | 1,660 | — | 1,482 | — | 1,706 | (1 | ) | ||||||||||||||||
| Total investments | $ | 44,699 | $ | 2,325 | $ | 45,318 | $ | 2,638 | $ | 46,262 | $ | 3,444 | |||||||||||
| Net receivable/(payable) on investment activity | $ | 82 | $ | (92 | ) | $ | (58 | ) | |||||||||||||||
| Effective portfolio duration (in years) | 6.2 | 6.5 | 6.3 | ||||||||||||||||||||
| Weighted average rating of fixed maturity securities | A | A | A | ||||||||||||||||||||
RMBS - Residential mortgage-backed securities
CMBS - Commercial mortgage-backed securities
Other ABS - Other asset-backed securities
10
Investment Summary - Property & Casualty and Corporate & Other Non-Core
| December 31, 2015 | September 30, 2015 | December 31, 2014 | |||||||||||||||||||||
| (In millions) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | |||||||||||||||||
| Fixed maturity securities: | |||||||||||||||||||||||
| Corporate and other bonds | $ | 12,594 | $ | 96 | $ | 12,926 | $ | 276 | $ | 13,444 | $ | 542 | |||||||||||
| States, municipalities and political subdivisions: | |||||||||||||||||||||||
| Tax-exempt | 2,441 | 133 | 2,663 | 112 | 2,561 | 127 | |||||||||||||||||
| Taxable | 1,579 | 132 | 1,647 | 156 | 1,454 | 169 | |||||||||||||||||
| Total states, municipalities and political subdivisions | 4,020 | 265 | 4,310 | 268 | 4,015 | 296 | |||||||||||||||||
| Asset-backed: | |||||||||||||||||||||||
| RMBS | 4,828 | 131 | 4,921 | 183 | 5,101 | 196 | |||||||||||||||||
| CMBS | 2,038 | 37 | 2,079 | 60 | 1,985 | 78 | |||||||||||||||||
| Other ABS | 837 | (1 | ) | 931 | 7 | 1,144 | 2 | ||||||||||||||||
| Total asset-backed | 7,703 | 167 | 7,931 | 250 | 8,230 | 276 | |||||||||||||||||
| U.S. Treasury and obligations of government-sponsored enterprises | 42 | — | 4 | — | 7 | (1 | ) | ||||||||||||||||
| Foreign government | 346 | 12 | 344 | 11 | 449 | 15 | |||||||||||||||||
| Redeemable preferred stock | 13 | 1 | 13 | 1 | 13 | 2 | |||||||||||||||||
| Total fixed maturity securities | 24,718 | 541 | 25,528 | 806 | 26,158 | 1,130 | |||||||||||||||||
| Equities | 87 | 1 | 104 | 2 | 87 | 9 | |||||||||||||||||
| Limited partnership investments | 2,548 | — | 2,738 | — | 2,937 | — | |||||||||||||||||
| Other invested assets | 44 | — | 45 | — | 41 | — | |||||||||||||||||
| Mortgage loans | 622 | — | 584 | — | 531 | — | |||||||||||||||||
| Short term investments | 1,513 | — | 1,390 | — | 1,586 | (1 | ) | ||||||||||||||||
| Total investments | $ | 29,532 | $ | 542 | $ | 30,389 | $ | 808 | $ | 31,340 | $ | 1,138 | |||||||||||
| Net receivable/(payable) on investment activity | $ | 204 | $ | (41 | ) | $ | 4 | ||||||||||||||||
| Effective portfolio duration (in years) | 4.3 | 4.4 | 4.0 | ||||||||||||||||||||
| Weighted average rating of fixed maturity securities | A | A | A | ||||||||||||||||||||
11
Investment Summary - Life & Group Non-Core
| December 31, 2015 | September 30, 2015 | December 31, 2014 | |||||||||||||||||||||
| (In millions) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | Carrying Value | Net Unrealized Gains (Losses) | |||||||||||||||||
| Fixed maturity securities: | |||||||||||||||||||||||
| Corporate and other bonds | $ | 5,166 | $ | 581 | $ | 5,262 | $ | 754 | $ | 5,445 | $ | 1,118 | |||||||||||
| States, municipalities and political subdivisions: | |||||||||||||||||||||||
| Tax-exempt | 7,673 | 943 | 7,540 | 799 | 7,241 | 861 | |||||||||||||||||
| Taxable | 1,481 | 237 | 1,447 | 252 | 1,484 | 298 | |||||||||||||||||
| Total states, municipalities and political subdivisions | 9,154 | 1,180 | 8,987 | 1,051 | 8,725 | 1,159 | |||||||||||||||||
| Asset-backed: | |||||||||||||||||||||||
| RMBS | 244 | 6 | 120 | 8 | 132 | 9 | |||||||||||||||||
| CMBS | 159 | 6 | 172 | 8 | 159 | 10 | |||||||||||||||||
| Other ABS | 84 | (1 | ) | 85 | — | 91 | (1 | ) | |||||||||||||||
| Total asset-backed | 487 | 11 | 377 | 16 | 382 | 18 | |||||||||||||||||
| U.S. Treasury and obligations of government-sponsored enterprises | 25 | 5 | 25 | 5 | 24 | 6 | |||||||||||||||||
| Foreign government | — | — | — | — | 5 | 1 | |||||||||||||||||
| Redeemable preferred stock | 22 | 1 | 22 | 1 | 29 | 1 | |||||||||||||||||
| Total fixed maturity securities | 14,854 | 1,778 | 14,673 | 1,827 | 14,610 | 2,303 | |||||||||||||||||
| Equities | 110 | 5 | 108 | 3 | 135 | 3 | |||||||||||||||||
| Limited partnership investments | — | — | — | — | — | — | |||||||||||||||||
| Other invested assets | — | — | — | — | — | — | |||||||||||||||||
| Mortgage loans | 56 | — | 56 | — | 57 | — | |||||||||||||||||
| Short term investments | 147 | — | 92 | — | 120 | — | |||||||||||||||||
| Total investments | $ | 15,167 | $ | 1,783 | $ | 14,929 | $ | 1,830 | $ | 14,922 | $ | 2,306 | |||||||||||
| Net receivable/(payable) on investment activity | $ | (122 | ) | $ | (51 | ) | $ | (62 | ) | ||||||||||||||
| Effective portfolio duration (in years) | 9.6 | 10.3 | 10.5 | ||||||||||||||||||||
| Weighted average rating of fixed maturity securities | A | A+ | A+ | ||||||||||||||||||||
12
Investments - Fixed Maturity Securities by Credit Rating
| December 31, 2015 | U.S. Government, Government agencies and Government-sponsored enterprises | AAA | AA | A | BBB | Non-investment grade | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | Fair Value | Net Unrealized Gains (Losses) | |||||||||||||||||||||||||||||||||||||||||
| Corporate and other bonds | $ | — | $ | — | $ | 86 | $ | 6 | $ | 752 | $ | 33 | $ | 4,604 | $ | 409 | $ | 10,485 | $ | 297 | $ | 1,833 | $ | (68 | ) | $ | 17,760 | $ | 677 | ||||||||||||||||||||||||||
| States, municipalities and political subdivisions: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax-exempt | — | — | 798 | 72 | 5,219 | 594 | 3,906 | 398 | 132 | 7 | 59 | 5 | 10,114 | 1,076 | |||||||||||||||||||||||||||||||||||||||||
| Taxable | — | — | 298 | 30 | 2,148 | 251 | 554 | 90 | 17 | (2 | ) | 43 | — | 3,060 | 369 | ||||||||||||||||||||||||||||||||||||||||
| Total states, municipalities and political subdivisions | — | — | 1,096 | 102 | 7,367 | 845 | 4,460 | 488 | 149 | 5 | 102 | 5 | 13,174 | 1,445 | |||||||||||||||||||||||||||||||||||||||||
| Asset-backed: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RMBS | 3,779 | 96 | 94 | — | 49 | (1 | ) | 122 | — | 75 | 1 | 953 | 41 | 5,072 | 137 | ||||||||||||||||||||||||||||||||||||||||
| CMBS | 64 | — | 493 | 11 | 475 | 15 | 314 | 8 | 597 | 4 | 254 | 5 | 2,197 | 43 | |||||||||||||||||||||||||||||||||||||||||
| Other ABS | — | — | 93 | — | 25 | — | 525 | (1 | ) | 278 | (1 | ) | — | — | 921 | (2 | ) | ||||||||||||||||||||||||||||||||||||||
| Total asset-backed | 3,843 | 96 | 680 | 11 | 549 | 14 | 961 | 7 | 950 | 4 | 1,207 | 46 | 8,190 | 178 | |||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury and obligations of government-sponsored enterprises | 67 | 5 | — | — | — | — | — | — | — | — | — | — | 67 | 5 | |||||||||||||||||||||||||||||||||||||||||
| Foreign government | — | — | 76 | 4 | 251 | 8 | 19 | — | — | — | — | — | 346 | 12 | |||||||||||||||||||||||||||||||||||||||||
| Redeemable preferred stock | — | — | — | — | — | — | — | — | 11 | 1 | 24 | 1 | 35 | 2 | |||||||||||||||||||||||||||||||||||||||||
| Total fixed maturity securities | $ | 3,910 | $ | 101 | $ | 1,938 | $ | 123 | $ | 8,919 | $ | 900 | $ | 10,044 | $ | 904 | $ | 11,595 | $ | 307 | $ | 3,166 | $ | (16 | ) | $ | 39,572 | $ | 2,319 | ||||||||||||||||||||||||||
| Percentage of total fixed maturity securities | 10 | % | 5 | % | 23 | % | 25 | % | 29 | % | 8 | % | 100 | % | |||||||||||||||||||||||||||||||||||||||||
13
Components of Net Investment Income
| Consolidated | ||||||||||||||||
| Periods ended December 31 | Three Months | Twelve Months | ||||||||||||||
| (In millions) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
| Taxable fixed maturities, prior to accounting change | $ | 341 | $ | 345 | $ | 1,381 | $ | 1,399 | ||||||||
| Tax-exempt fixed maturities, prior to accounting change | 105 | 102 | 409 | 404 | ||||||||||||
| Total fixed maturity securities, prior to accounting change | 446 | 447 | 1,790 | 1,803 | ||||||||||||
Impact of accounting change (1) | (39 | ) | — | (39 | ) | — | ||||||||||
| Total fixed maturity securities | 407 | 447 | 1,751 | 1,803 | ||||||||||||
| Limited partnership investments | 23 | 64 | 92 | 263 | ||||||||||||
| Other, net of investment expense | (2 | ) | — | (3 | ) | 1 | ||||||||||
| Net investment income | $ | 428 | $ | 511 | $ | 1,840 | $ | 2,067 | ||||||||
| Fixed maturity securities, after tax | $ | 296 | $ | 322 | $ | 1,264 | $ | 1,298 | ||||||||
| Net investment income, after tax | $ | 314 | $ | 365 | $ | 1,329 | $ | 1,473 | ||||||||
| Effective income yield for the fixed maturity securities portfolio, pretax | 4.3 | % | 4.8 | % | 4.7 | % | 4.8 | % | ||||||||
| Effective income yield for the fixed maturity securities portfolio, after tax | 3.2 | % | 3.4 | % | 3.4 | % | 3.5 | % | ||||||||
| Property & Casualty and Corporate & Other Non-Core | ||||||||||||||||
| Periods ended December 31 | Three Months | Twelve Months | ||||||||||||||
| (In millions) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
| Taxable fixed maturities | $ | 232 | $ | 244 | $ | 965 | $ | 992 | ||||||||
| Tax-exempt fixed maturities | 8 | 23 | $ | 74 | 107 | |||||||||||
| Total fixed maturity securities | 240 | 267 | 1,039 | 1,099 | ||||||||||||
| Limited partnership investments | 23 | 64 | 92 | 263 | ||||||||||||
| Other, net of investment expense | 1 | 1 | 5 | 5 | ||||||||||||
| Net investment income | $ | 264 | $ | 332 | $ | 1,136 | $ | 1,367 | ||||||||
| Fixed maturity securities, after tax | $ | 163 | $ | 181 | $ | 705 | $ | 751 | ||||||||
| Net investment income, after tax | $ | 182 | $ | 224 | $ | 772 | $ | 926 | ||||||||
| Effective income yield for the fixed maturity securities portfolio, pretax | 3.9 | % | 4.2 | % | 4.2 | % | 4.3 | % | ||||||||
| Effective income yield for the fixed maturity securities portfolio, after tax | 2.7 | % | 2.8 | % | 2.9 | % | 3.0 | % | ||||||||
| Life & Group Non-Core | ||||||||||||||||
| Periods ended December 31 | Three Months | Twelve Months | ||||||||||||||
| (In millions) | 2015 | 2014 | 2015 | 2014 | ||||||||||||
| Taxable fixed maturities | $ | 103 | 101 | $ | 410 | $ | 407 | |||||||||
| Tax-exempt fixed maturities | 64 | 79 | 302 | 297 | ||||||||||||
| Total fixed maturity securities | 167 | 180 | 712 | 704 | ||||||||||||
| Limited partnership investments | — | — | — | — | ||||||||||||
| Other, net of investment expense | (3 | ) | (1 | ) | (8 | ) | (4 | ) | ||||||||
| Net investment income | $ | 164 | $ | 179 | $ | 704 | $ | 700 | ||||||||
| Fixed maturity securities, after tax | $ | 133 | $ | 141 | $ | 559 | $ | 547 | ||||||||
| Net investment income, after tax | $ | 132 | $ | 141 | $ | 557 | $ | 547 | ||||||||
| Effective income yield for the fixed maturity securities portfolio, pretax | 5.2 | % | 5.9 | % | 5.6 | % | 5.9 | % | ||||||||
| Effective income yield for the fixed maturity securities portfolio, after tax | 4.1 | % | 4.6 | % | 4.4 | % | 4.6 | % | ||||||||
(1) The amortization of premium and accretion of discount for fixed maturity securities takes into consideration call and maturity dates that produce the lowest yield. This represents a change from prior reporting periods as previously the amortization of premiums was to maturity. This change in estimate effected by a change in accounting principle was adopted in Q4 2015 and will result in a better reflection of the yield on fixed maturity securities with call provisions.
14
Claim & Claim Adjustment Expense Reserve Rollforward
Three months ended December 31, 2015 (In millions) | Specialty | Commercial | International | P&C Operations | Life & Group Non-Core | Corporate & Other Non-Core | Total Operations | ||||||||||||||||||||
| Claim & claim adjustment expense reserves, beginning of period | |||||||||||||||||||||||||||
| Gross | $ | 6,199 | $ | 9,283 | $ | 1,365 | $ | 16,847 | $ | 3,286 | $ | 2,734 | $ | 22,867 | |||||||||||||
| Ceded | 611 | 634 | 151 | 1,396 | 310 | 2,436 | 4,142 | ||||||||||||||||||||
| Net | 5,588 | 8,649 | 1,214 | 15,451 | 2,976 | 298 | 18,725 | ||||||||||||||||||||
| Net incurred claim & claim adjustment expenses | 445 | 426 | 144 | 1,015 | 239 | 1 | 1,255 | ||||||||||||||||||||
| Net claim & claim adjustment expense payments | (465 | ) | (499 | ) | (110 | ) | (1,074 | ) | (184 | ) | (15 | ) | (1,273 | ) | |||||||||||||
| Foreign currency translation adjustment and other | — | — | (29 | ) | (29 | ) | (101 | ) | (1 | ) | (131 | ) | |||||||||||||||
| Claim & claim adjustment expense reserves, end of period | |||||||||||||||||||||||||||
| Net | 5,568 | 8,576 | 1,219 | 15,363 | 2,930 | 283 | 18,576 | ||||||||||||||||||||
| Ceded | 701 | 607 | 128 | 1,436 | 290 | 2,361 | 4,087 | ||||||||||||||||||||
| Gross | $ | 6,269 | $ | 9,183 | $ | 1,347 | $ | 16,799 | $ | 3,220 | $ | 2,644 | $ | 22,663 | |||||||||||||
Twelve months ended December 31, 2015 (In millions) | Specialty | Commercial | International | P&C Operations | Life & Group Non-Core | Corporate & Other Non-Core | Total Operations | ||||||||||||||||||||
| Claim & claim adjustment expense reserves, beginning of period | |||||||||||||||||||||||||||
| Gross | $ | 6,229 | $ | 9,514 | $ | 1,441 | $ | 17,184 | $ | 3,183 | $ | 2,904 | $ | 23,271 | |||||||||||||
| Ceded | 574 | 661 | 180 | 1,415 | 340 | 2,589 | 4,344 | ||||||||||||||||||||
| Net | 5,655 | 8,853 | 1,261 | 15,769 | 2,843 | 315 | 18,927 | ||||||||||||||||||||
| Net incurred claim & claim adjustment expenses | 1,597 | 1,815 | 480 | 3,892 | 949 | 4 | 4,845 | ||||||||||||||||||||
| Net claim & claim adjustment expense payments | (1,684 | ) | (2,092 | ) | (403 | ) | (4,179 | ) | (734 | ) | (32 | ) | (4,945 | ) | |||||||||||||
| Foreign currency translation adjustment and other | — | — | (119 | ) | (119 | ) | (128 | ) | (4 | ) | (251 | ) | |||||||||||||||
| Claim & claim adjustment expense reserves, end of period | |||||||||||||||||||||||||||
| Net | 5,568 | 8,576 | 1,219 | 15,363 | 2,930 | 283 | 18,576 | ||||||||||||||||||||
| Ceded | 701 | 607 | 128 | 1,436 | 290 | 2,361 | 4,087 | ||||||||||||||||||||
| Gross | $ | 6,269 | $ | 9,183 | $ | 1,347 | $ | 16,799 | $ | 3,220 | $ | 2,644 | $ | 22,663 | |||||||||||||
15
Life & Group Non-Core Policyholder Reserves
| December 31, 2015 | |||||||||||
| (In millions) | Claim and claim adjustment expenses | Future policy benefits | Total | ||||||||
| Long term care | $ | 2,229 | $ | 8,335 | $ | 10,564 | |||||
| Structured settlement annuities | 581 | — | 581 | ||||||||
| Other | 21 | — | 21 | ||||||||
| Total | 2,831 | 8,335 | 11,166 | ||||||||
| Shadow adjustments | 99 | 1,610 | 1,709 | ||||||||
| Ceded reserves | 290 | 207 | 497 | ||||||||
| Total gross reserves | $ | 3,220 | $ | 10,152 | $ | 13,372 | |||||
| December 31, 2014 | |||||||||||
| (In millions) | Claim and claim adjustment expenses | Future policy benefits | Total | ||||||||
| Long term care | $ | 2,064 | $ | 7,782 | $ | 9,846 | |||||
| Structured settlement annuities | 606 | — | 606 | ||||||||
| Other | 28 | 1 | 29 | ||||||||
| Total | 2,698 | 7,783 | 10,481 | ||||||||
Shadow adjustments (1) | 145 | 1,522 | 1,667 | ||||||||
| Ceded reserves | 340 | 185 | 525 | ||||||||
| Total gross reserves | $ | 3,183 | $ | 9,490 | $ | 12,673 | |||||
(1) The Shadow adjustments presented above do not include $314 million related to Deferred acquisition costs as of December 31, 2014.
16
Definitions and Presentation
| • | Collectively, CNA Financial Corporation (CNAF) and its subsidiaries are referred to as CNA or the Company. |
| • | P&C Operations includes Specialty, Commercial and International. |
| • | Life & Group Non-Core segment primarily includes the results of long term care businesses that are in run-off. |
| • | Corporate & Other Non-Core segment primarily includes certain corporate expenses including interest on corporate debt and the results of certain property and casualty business in run-off, including CNA Re and asbestos and environmental pollution. Intersegment eliminations are also included in this segment. |
| • | Management uses the net operating income (loss) financial measure to monitor the Company’s operations. Please refer to Note J to the Condensed Consolidated Financial Statements within the September 30, 2015 Form 10-Q for further discussion of this measure. |
| • | Management uses underwriting results to monitor insurance operations. Underwriting results are pretax and are calculated as net earned premiums less total insurance expenses, which includes insurance claims and policyholders' benefits, amortization of deferred acquisition costs and other insurance related expenses. |
| • | In the evaluation of the results of Specialty, Commercial and International, management uses the loss ratio, the expense ratio, the dividend ratio and the combined ratio. These ratios are calculated using financial results prepared in accordance with accounting principles generally accepted in the United States of America. The loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums. The expense ratio is the percentage of insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. The dividend ratio is the ratio of policyholders' dividends incurred to net earned premiums. The combined ratio is the sum of the loss, expense and dividend ratios. In addition, management also utilizes rate, retention and new business in evaluating operating trends. Rate represents the average change in price on policies that renew excluding exposure change. Retention represents the percentage of premium dollars renewed in comparison to the expiring premium dollars from policies available to renew. New business represents premiums from policies written with new customers and additional policies written with existing customers. |
| • | Pretax net prior year development and other includes the effects of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts. |
| • | The majority of our limited partnership investments employ hedge fund strategies that generate returns primarily through investing in marketable securities in the public fixed income and equity markets. While the Company generally does not invest in highly leveraged partnerships, there are risks which may result in losses due to short-selling, derivatives or other speculative investment practices. The use of leverage increases volatility generated by the underlying investment strategies. |
| • | Certain immaterial differences are due to rounding. |
| • | N/M = Not Meaningful |
17